A powerful committee of MPs is to grill the top officials at the Bank of England this month over the way they have handled the liquidity crisis.

As money-market lending rates rose to their highest level in more than eight years, Michael Fallon, a leading Conservative on the cross-party Commons Treasury Committee, said that the Bank needed to explain its policies.

"The Bank is handling this very differently from other central banks," he said. "We need to understand why."

Mervyn King, the Bank's Governor, and Sir John Gieve, its deputy governor for financial stability, will appear before the Committee on September 20, along with three other members of the Bank's rate-setting Monetary Policy Committee.

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The meeting had been scheduled to discuss the quarterly Inflation Report published last month.

But Mr Fallon said that his fellow MPs would ask about the Bank's emergency credit facility, the role of credit ratings agencies and the stability of the financial system.

"We will ask how the emergency facility is being used, what the Bank's view of liquidity is, how we got into this position, and what reassurances the Bank can provide as to the stability of the entire system," he said.

The Bank of England has been criticised for preventing institutions that have made use of its emergency short-term lending facility from making themselves public. Others have argued that its hands-off approach to liquidity has damaged confidence in the money markets.

Later this week, the Bank of England's Monetary Policy Committee will announce any changes to the UK interest which at 5.75 per cent has risen five times since August last year.

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